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Apple Stock Undervalued, says Activist Investor Carl Icahn

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b2ap3_thumbnail_Carl_c_Icahn_AppleLetterOct92014.jpgOutspoken self declared activist investor Carl Icahn has published an open letter to Tim Cook, the CEO of Apple, urging him to buy back a large chuck of Apple stocks in order to popup the price. According to Carl Icahn, the stock of Apple is undervalued and could fall to below $95.00 if the buy back does not happen.  He believes that, if rightly valued, Apple's share price should be around $203.


In the open letter published on his Tumblr website and titled: Sale: Apple Shares at Half Price",  Icahn argues that Apple momentum and fundamentals will remain and hence, there is no reason not to buy back the stock.

According to Icahn, "users of competitive products see the iPhone 6/6+ as an exciting opportunity to choose a superior product. Now that iPhone offers a larger screen size, its price competitiveness in the premium phone market is clear". Basically, Icahn argues that current iPhone users will not switch to the competitors, while iPhone 6 and 6 Plus will get Android users to switch to iPhone.

 Icahn argues that the $133 billion in net cash held by Apple at the end of September 2014 is "excessive liquidity"

Opportunity Everywhere

Icahn sees growth opportunity in almost all Apple products:

  • iPhone, with the launch of iPhone 6 and iPhone 6 Plus
  • iPad with the rumored, impending offering of "a larger screen 12.9” iPad in FY 2015 and the  improved offering of its 7.9” iPad Mini and its 9.7” iPad Air."
  • Mac, with a forecasted continued growth, overtaking the PC market
  • iTunes, Software and Services, Accessories, and iPod, as the fastest growing segment, even if the contribution to margin remains relatively small
  •  Apple Watch, a revolutionary product expected to have a significant impact on Apple’s growth beginning early 2015.
  •  UltraHD  Television, expected in 2016 that will move from being a hobby to  a mass market product
  •  HomeKit and HealthKit, expected to immensely and positively impact revenues
  •  Apple Pay, with a tremendous international opportunity.

Caching In ?

Brief, Icahn sees opportunity in each and every corner of Apple and would like Apple to capitalize on it. However, it appears that Icahn would rather want to cash out from the projected momentum of Apple. Otherwise, he would leave his stock shares with Apple, and sell them when all these predicted opportunities have been leveraged.

The word of Icahn, who holds 53 millions shares, will certainly have a weight. Whether this will sway Tim Cook remains to be seen. However, he has a proven successful in influencing decisions in tech companies he has invested in.

From opposing  Michael Dell's efforts to privatize PC maker Dell, to winning three seats on the Yahoo Board of Directors, to ousting the CEO of Motorola, to pushing eBay to spin off PayPal,  he has proven to be a force to be reckoned with.

©2014 AfroAmerica Network.

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